Defence spending gets a boost with Rs 6.8 lakh crore allocation, as defence capex up 12.9%

Defence capex for Fy26

India’s defence sector received yet another fund boost, with finance minister Nirmala Sitharaman budgeting Rs 6.8 lakh crore for the coming year, as the government continues to step up efforts to make in India.

Capital spending, which has become one of the primary sectors of defence spending, also saw a 12.9 percent boost, with the government allocating Rs 1.8 lakh crore.

Data shows that India has seen a steady rise in defence allocation since 2019, with capex creation 50 percent higher than the pre-pandemic period.

Defence capex grew at a compounded annual growth rate of 9.1 percent between FY20 and FY25, compared with 6 percent in FY15-FY20.

Defence’s capex spending doubled in the 11 years the Modi government has been in power, with the share at its highest level of 27.7 percent in 2024-25 compared with 25.2 percent in the previous fiscal.

The share of defence spending in GDP, however, has declined in the post-pandemic period. Defence accounted for 2.3 percent of GDP until 2020-21 but declined to 2.1 percent between 2021-22 and 2024-25.

In 2024-25, the share of defence spending fell below 2 percent for the first time in more than a decade, as expenditure stood at Rs 6.2 lakh crore.

The government has set an ambitious target to more than treble the defence production to Rs 3 lakh crore by FY29 and raise exports to Rs 50,000 crore.

India was the fourth largest military spender in 2023, Stockholm International Peace Research Institute (SIPRI) data shows. India's spending was a tenth of the US, the top spender, and just about a fourth of China’s. In 2023, defence accounted for 1.2 percent of China’s military spending.

A Moneycontrol analysis found that India has been ramping up exports as well. Indian arms have found markets in east and southeast Asia over the last five years. Myanmar and Vietnam were the two major recipients of arms transfers from India.

India is close to signing a Rs 3,800 crore deal with Indonesia for indigenously developed supersonic BrahMos missiles.

The country’s defence exports have grown over 10 fold in the last decade from Rs 1,900 crore in 2014-15 to Rs 21,000 crore in 2023-24.